The GOP's 1st Commandment: Blame The Victim

As I outlined in my previous post, "Mission Accomplished", the politicization of the U.S. Justice Department allowed Bush and his cronies to assume extra-constitutional powers in order to rape and steal with impunity. As James Galbraith explains in his most recent book, The Predator State, during the last decade, the neoconservatives in Washington and on Wall Street have conspired to steal elections and occupy the most powerful political and financial institutions in the land so that they might abuse that power. And while it is true that Cheney and Bush could not have achieved so much without the complicity of the courts and Congress, it cannot be overstated that a crucial role continues to be played by the corporate right-wing media.

In psychology the term "projection" is described as belonging to one who perceives in others the motive he denies having himself. Thus the cheat is sure that everyone else is dishonest. It is a characteristic increasingly on display now that the neocons have had their greed and lies exposed.

Take the latest talking points being spouted on Fox News and by CNN commentators like Glenn Beck and Lou Dobbs. First they blamed the subprime lending mess on the Community Reinvestment Act, a 31-year-old law aimed at freeing credit for underserved neighborhoods. Now that the public is onto their game the right-wing's strident mouthpieces have turned to braying that everything would have been rosy were it not for "those white liberals" and their "need to appease" those unworthy blacks and latinos.

Blaming the CRA has been peddled by Charles Krauthammer, Fox News, the Wall Street Journal, Washington Times, and the National Review. But as the global markets continue to tumble and the truthtellers finally get a hearing, it is clear that their dog won't hunt.

Take the recent conservative claim that it was the government's push to make housing more affordable to lower-class Americans that precipitated the current crisis. Janet Yellen, the president of the Federal Reserve Bank of San Francisco, debunked it from early last March:

"Most of the loans made by depository institutions examined under the CRA have not been higher-priced loans. The CRA has increased the volume of responsible lending to low- and moderate-income households."

In fact, Federal Reserve Board data show that:

-More than 84 percent of the subprime mortgages in 2006 were issued by private lending institutions.

-Private firms made nearly 83 percent of the subprime loans to low- and moderate-income borrowers that year.

-Only one of the top 25 subprime lenders in 2006 was directly subject to the housing law that's being lambasted by conservative critics.

When their racist smear did not catch on the right-wing pundits shifted to claim it was those government sponsored entities like Fannie Mae and Freddie Mac that created the financial meltdown. In reality, Fannie and Freddie don't lend money, to minorities or anyone else. They purchase loans from private lenders who actually underwrite those loans. And it was Bush's deliberate expansion of these security transactions made possible by the Gramm/Bliley Act that repealed Glass/Steagall that led Wall Street to indulge in their decriminalized shenanigans.

As the McClatchy Papers explain: Fannie and Freddie didn't pressure lenders to sell them more loans; they struggled to keep pace with their private sector competitors. In fact, their regulator, the Office of Federal Housing Enterprise Oversight, imposed new restrictions in 2006 that led to Fannie and Freddie losing even more market share in the booming subprime market.

What's more, only commercial banks and thrifts must follow CRA rules. The investment banks don't, nor did the now-bankrupt non-bank lenders such as New Century Financial Corp. and Ameriquest that underwrote most of the subprime loans.

These private non-bank lenders enjoyed a regulatory gap, allowing them to be regulated by 50 different state banking supervisors instead of the federal government. And mortgage brokers, who also weren't subject to federal regulation or the CRA, originated most of the subprime loans.

As the late Federal Reserve Governor Ed Gramlich wrote back in 2007 "only one-third of all CRA loans had interest rates high enough to be considered sub-prime and that to the pleasant surprise of commercial banks there were low default rates. Banks that participated in CRA lending had found, 'that this new lending is good business.'"

It is crucial to note that it was Angela Merkel's promise to back her own German banks that put pressure on the rest of the Europeans who (at least for the moment) have successfully averted the neocons' $780 billion swindle. It is also encouraging to see Barack Obama finally finding the courage to lead the way: he now proposes that "government buy ownership in the major banks to keep them afloat while cutting capital gains taxes for investments in small business"

It's a start but as president Obama will have to ignore the right-wing noise machine and take more drastic action, such as the Nation's William Greider has previously proposed:
First, he should take due bills from any financial firms providing there is a hard contract that repays taxpayers from any future profits. Second, Wall Street must be prohibited from exercising their usual manipulations of the political system. They must call off their lobbyists, bar them from the bribery disguised as campaign contributions. Any contact or conversations between the assisted bankers and financial houses with government agencies or elected politicians must be promptly reported to the public, just as regulated industries are required to do when they call on government regulars.

To get out of this financial mess at the very minimum we need a Second New Deal. One that allows government to lend directly to established businesses, solvent banks, as well as the consumer markets. Only time will tell if Obama and/or the American public have the savvy and guts to demand it.